By Duane Marsteller, The Tennessean
Farm Bureau policyholders soon will have to dig deeper to fix their
damaged roofs, and more Tennessee homeowners could be following suit
because of last year's severe weather.
Tennessee Farmers Mutual Insurance Co., better known as Farm Bureau,
said it will no longer pay 100 percent of the cost for replacement
shingles and other roofing materials. Instead, it will cover only the
actual cash value, or replacement cost minus depreciation.
change, which applies to policies written or renewed on Oct. 1 and
afterward, means homeowners could be liable for as much as 75 percent of
the cost of new roofing materials.
The new policy doesn't apply
to trusses, decking or other structural roof components, which -- along
with labor -- remain fully covered.
Farm Bureau officials called
the move necessary to shore up the company's bottom line. "We had to
make this change because we can't continue to be unprofitable and lose
money," spokesman Dan Batey said.
The insurer has paid out more in
claims than it has collected in premiums every year since 2008,
prompting Standard & Poor's to lower Farm Bureau's credit and financial strength ratings last month. The insurer has been drawing down its surplus fund to cover the gaps.
the situation worsened last year, when the company paid out $1.40 for
every $1 it took in. The resulting $267 million shortfall largely
stemmed from replacing older, past-their-prime roofs that were damaged
by severe weather, Farm Bureau said in a filing with state regulators.
Farm Bureau already had limited its coverage of certain older roofs,
the company felt it had to expand it to all of its 380,000 policies in
Tennessee, Batey said.
The company has been notifying policyholders of the change, which has drawn some criticism.
a post on the company's Facebook page, Jason Paul Kimbrell of
Lawrenceburg, Tenn., said, "This is ridiculous and you will lose
But others said they understood the reasons for the
change. "Thanks for being forthright and transparent," posted Laura
Mansfield Bower of Knoxville.
Not that unusual in TN
insurance officials said Farm Bureau, Tennessee's second-largest home
insurer, is the first to apply the coverage limits to all of its
policies in the state.
But the limitation itself isn't that unusual in Tennessee. Allstate has it for all new policies, the Tennessee Department of Commerce and Insurance
said. And Homesite, affiliated with Geico and Progressive, in July
began limiting coverage of hail- and/or wind-damaged roofs that are at
least 10 years old.
Insurers have been financially stung by a spate of severe weather in Tennessee in recent years, including the May 2010 flooding
in Nashville, an April 2011 tornado outbreak and several hailstorms
last summer. That made Tennessee the nation's most unprofitable
homeowners' insurance market last year, according to an analysis by SNL
Financial, a financial information firm in Charlottesville, Va.
said it long had been a common industry practice to offer limited roof
coverage. That began to change in the early 1990s, as insurers began
offering full replacement coverage as a means of gaining market share.
"It ended up basically being, if you had roof damages, you got a new roof," he said. "You can't afford to keep doing that."
Bureau's move may swing the pendulum the other way, said Ryan White,
managing partner of Raymond Preston & Reed, an independent insurance
agency in Nashville. "Companies either will start raising deductibles
or doing ACV (actual cash value)," he said.
Julie Mix McPeak, Tennessee's insurance commissioner, urged people to review their policies to see what is and isn't covered.